Lobby wants Senate, counties in debt talks

A lobby group wants the Senate and counties to be involved in the discussion on national borrowing because it has an impact on the revenue that is shared between the two levels of government.

The International Budget Partnership Kenya (IBP Kenya) told Senators that total debt service has been growing at a very high rate and is limiting how much is available for allocation to devolved services.

“Public debt, pensions and other charges of the consolidated fund services are crowding out the amount available for the division of revenue and hurting counties allocation,” Abraham Muriu, IBP Kenya country manager told the Finance and Budget Committee.

He appeared before the committee that is conducting public participation on the Division of Revenue Bill 2021.

“We recommend that counties and the Senate should be involved in the discussion on national borrowing as that has an impact on the revenue that is shared between the two levels of government,” Dr Muriu told the committee chaired by Kirinyaga Senator Charles Kabiru.

Repayment of public debt will for the first time cross the Sh1 trillion mark from July, underlining the burden of mounting government borrowing.

The Treasury in February disclosures to Parliament show that it will pay Sh1.023 trillion for loans in the year starting July, making it the single-largest expenditure and more than double the Sh435.7 billion that taxpayers paid for debt four years ago.

debt payments

At Sh1.023 trillion, Kenya will require an average of Sh2.8 billion daily in the financial year when the repayment of principal sums of a majority of the commercial and semi-concessional loans fall due.

The Jubilee administration has ramped up borrowing in recent years to build a range of infrastructure projects, leading to a squeeze on its finances as the loans fall due just as the economy is reeling from the impact of the coronavirus crisis.

Kenya will use Sh5.76 for every Sh10 collected as taxes and other levies in the year starting July for debt payments.

Kenya’s public debt currently stands at Sh7.6 trillion up from Sh1.89 trillion in June 2013 when former President Mwai Kibaki left office.

Dr Muriu told lawmakers that the growth in county allocation over the years has been very minimal, which affects service delivery.

“We also note that the growth in ordinary revenue has been very marginal. More importantly, while public borrowing has a very direct impact on the size of the sharable revenue, the National Treasury is the only body deciding on this vital national instrument,” said Dr Muriu.

The IBP-Kenya said pensions and other Consolidated Fund Services have equally grown, and their administration is of concern.

“Pension is a non-discretionary obligation which has a bearing on the size of revenue that is eventually shared between the two levels of government,” he said.

Dr Muriu said the higher the share of ordinary revenue that is taken up by national obligations, the lower the sharable revenue and allocations to counties.